F OR P UBLICATION



### UNIT E D ST AT E S CO URT O F APPE AL S FO R T H E NINT H CIRCUIT

P O R T L A N D G E N E R A L E L E C T R

I C C O M P A N Y , Plaintiff-Appellee

,

v.

L I B E R T Y M U T U

A L I N S U R A N C E C O M P A N Y ; Z U R I C H A M E R

I C A N I N S U R A N C E C O M P A

N Y , Defendants-Appellants. No. 16-35628

D.C. No. 3:16-cv-00495-HZ

OPI NI ON

A ppeal from the United States District Court for the District of Oreg on Marco A. Hernandez

, District J udg e, Presiding

Arg ued and Submitted May 8, 2017 Portland, Oreg on

F iled J uly 10, 2017

B e fore: J ay

S. B y b ee and Andrew D. Hurwitz , Circuit J udg es, and J ed S. Rakoff, * Senior District J udg e.

Opinion by

J udg e Rakoff

* T h e Ho n o rab le J ed S. Rak o f f

, Sen io r Un ited States District J u dg e f o r th e So u th ern District o f New Yo rk , sittin g b y

d esig n atio n

.PGE V

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2

SUMMARY * *

Arbitration

The p an e l v a cated the district court’s judg ment entering

a preliminary injunction p r o hibiting sureties from pursuing claims ag ains t Portland General Electric Company (“PGE”) in arbitration and d e n y i n g a mandatory stay of the judicial proceeding s u nder § 3 o f the F ederal A r b i t r ation Act, a

nd remanded for further proceeding s; and dismissed for lack o f appellate jurisdiction the sureties’ appeal from the o rder deny ing their motion for a discretionary stay

.

The a ppeal involves the interplay of three r elated
contracts: a Construction Contract e n t e red by PGE a nd several contracting companies to build a n Oreg on power plant; a performance B o n d in which appellants/s ureties L iberty Mutual I ns u r ance Company and Z urich American I nsurance Company issued a bond to PGE as required by the Construction Contract; and a Guaranty of performance issued
to PGE by its parent company , Abeng oa S.A. The Guaranty
pr o v i d e d that the parties submit a ny disputes to binding arbitration to be conducted by the I nternational Chamber o f Commerce (“I CC”) under its procedural rules and O reg on substantive law.

PGE filed this diversity action ag ai n st the sureties, alleg ing breach of the B ond a n d bad faith; and PGE soug h t a preliminary injunction prohibiting the sureties from arbitrating their claims ag a inst PGE.

** T h is su m m ary co n stitu

t es n o p art o f th e o p in io n o f th e co u rt. It h as b een p rep ared b y

co u rt staf

f f o r th e co n v en i en ce o f

th e read er.PGE V

. L MI C 3

The p anel held that the incor p oration of the I CC Rules into a n a rbitration a g reement constituted clear a nd

u n m istakable evidence of a d eleg ation of g ateway issues o f arbitrability

to the arbitrator.

The p anel rejected PGE’s contention that the I CC Rules did not g overn the present dispute because the B ond l acked

an arbitration clause. The panel held that the following were questions of the scope of the arbitration ag reeme n t in the Guaranty
, a

nd deleg ated to the arbitrators: whether A beng oa properly joined the sureties to the arbitration pursuant to the Guarant y an d the I CC Rules; w hether the sureties’ claim
ag ainst PGE met the Guaranty ’s test of “ aris[ ing ] out of or in connection with an ag reement w ith a subcontr a c t o r or [ the] Guaranty ,” a

nd whether PGE had therefore ag reed to a rbitrate its disputes ag ainst the sureties. T h e panel concluded that the district court erred in enjoining the sureties from participating in the I CC a

rbitration, and preventing the arbitral t r i b u n al from addressing

the scope of the arbitration.

COUNSEL

Eric D. Miller (arg

u ed), Perkins Coie L L P, S e attle, W a shing ton; David B ledsoe, Perkins Coie L L P, Portland, Oreg on; for Plaintiff-Appellee.

J ohn Spencer Stew a rt (arg ued), Mario R. Nicholas, T h omas Ardell L arkin, and J an D. Sokol, Stewart Sokol & L arkin L L C, Portland, Oreg on, for Defendant-Appellants.

Nathan D. O ’Malley (arg ued) a n d S ara H. Kornblatt, Gibbs Giden L oc h e r Turner Senet & W ittbrodt L L P, L os Ang eles, California, for Amicus Curiae Abeng oa.PGE V

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OP INION

RAKOF F , Senior District J udg e:

I f two parties enter a cont r a c t that both requires arbitration of their disputes and allows impleader of a third party , must a party that did n ot initiate the impleader a rbitrate

a dispute that arises out o f the same transaction a t issue in the arbitration w ith the impleaded third p ar t y ? W e hold, on the facts of this case, that this question is really a question about the scope of the arbitration clause for the arbitrator to decide. Sinc e , instead, the d istrict court undertook to decide that question, we vacate and remand.

B ACKGROUND

T his appeal concerns the interplay of three rela t e d contracts. I

n the first (the “ Construction Contract”), entered i n t o i n J une 2013, appellee Portland General Electric Company (“PGE”) h ired several related c ontracting companies ( collectively

, the “Contractor”) to build a n O reg on power plant. The Constructi o n C o ntract allows PGE to terminate the ag reement upon the Contracto r ’ s default. A “Disputes” p r o v i s ion r equires the p arties to attempt to mediate any disputes, but if mediation fails, “each Party shall have the rig ht to tak e w h a t e v er leg al actions that they may choose.” A “Choice of L aw; J ur isdiction” p rovision states that the ag reement is g overned by Oreg on substantive law and that the parties “consent to the ex clusive jurisdiction o f
any U .S. f

e d e r al court with jurisdiction over Oreg on.” ThePGE V

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contract passing ly mentions arbitrati o n twice, but d o es not require it. 1

Th e C onstruction Contract requires the Contractor to obtain a performance bond. Appell a n ts L iberty Mutual I nsura n ce Company and Z urich American I nsurance Company (collectively

, the “ Sureties”) issued the r e quired b ond (the “B ond”) to PGE. The B ond incorporat es t h e Construction Contract by ref e r ence and states that “[ a] n y proceeding

, leg al or e q

u itable, under t h i s Bond may be instituted in a

ny court of competent jurisdiction in the location in w hich the work or p art of the work is located, a nd in any court(s) to wh i c h t he Parties to the Construction Contract have ag r eed will have ju r i s d iction over disputes thereunder.” The B ond is silent as to arbitration.

The Construction Contract also requires the Contractor to obtain a g uaranty of performance from a parent company , Abeng oa S.A. (“Abeng oa”). Abeng oa issued a g uaranty to PGE (the “Guaranty

”), in which b oth partie s consented to submit any disputes “in connection w ith t h i s Guaranty ” to bi n d i n g arbitration. Of p articular r elevance here, the Guaranty specifies that th e a r b itration is to be conducted b y the I nternat i o n al Chamber o f Commerce (“I CC”) under its procedural r

ules and O reg on substantive law, and that “[ o] nce the arbitration proceeding is commenced hereu n d e r, either

1 A “ R esp on sib ilities o f Co n tracto r” p ro v isio n g iv es P GE th e rig h t to

au d it th e Co n t

racto r; P GE m

u st “ treat su ch au d it d ata as co n f id en tial, b u t sh all n o t b e p reclu d ed f

ro m u sin g su ch au d it d ata in an y leg al p ro ceed in g s (in clu d in g w i th o u t lim itatio n m ed iatio n o r arb itratio n ) arisin g u n d er th is A g reem en t.” A “ Co s t s an d A tto rn ey Fees” p ro v isio n states: “ In an y litig atio n arisin g o u t o f th is A g reem en t, in clu d i n g arb itratio n an d an y case

o r p ro ceed in g u n d er t h e B an k ru p tcy Co d e o r an y su ccesso r statu te, th e p rev ailin g P arty

sh all b e en t itled to reco v er [reaso n ab le ex p en ses].”PGE V

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6

Party may implead a

ny other person o r entity (with such
person or entity ’s consent) in, and/or raise any claim ag ainst,
any oth er person or e ntity provided such claim a rises out o f

o r in connection with an ag r eement with a Subcontracto r o r this Guaranty .”

On December 18, 2015, PGE declared the Contractor in default and terminated the Construction Contract. A beng oa filed a Request for Arbitration with the I CC on December 31, 2015, naming PGE as “ respondent” and the Contractor as an “impleaded” party

. Abeng oa co n t e n ded that the Contractor had not defaulted, that PGE’s termination of the Construction Contract was wrong ful, and that Abeng oa owed PGE nothing under the Guaranty . The Contractor soug ht similar relief.

On March 2, 2016, A beng oa f i l e d a Request for J oinder in the arbitration, seeking to include the Sureties, w h o, under the B ond, would be liable to PGE if the Contractor h ad defaulted. Abeng oa invoked both the impleader provision in the Guaranty

and Article 7 of the I CC Rules. 2 Abeng oa also

s o u g ht a declaration that the Sureties owed PGE n oth i n g under the B ond. T he Sureties consented to the arbitration a nd

2 A rticle 7
, titled “ J o in d er of Ad d i tio n al P arties,” states in relev an t p art:

A p arty w ish i n g to j o in an ad d itio n al p arty to th e arb i tratio n sh all su

bm it its req u est f

o r ar b i t r atio n ag ain st th e ad d itio n al p arty (th e “ R eq u est f o r J o in d er”)
to th e Secretariat.

. . . A n y su ch j o in d er sh all b e su b j ect to th e p ro v isio n s of A rticles 6 (3 )– 6 (7 ) [g o v e r n in g th e in terp retatio n o f arb itratio n ag reem en ts] an d 9 [g o v ern in g claim s arisin g o u t o f m o r e t han on e

co n t ract].

ICC Ru les, A rticle 7 (1 ).PGE V

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soug h t similar relief. On March 9, 2 0 1 6
, the Sureties sent PGE a letter deny

ing liability under the B ond.

Two weeks la t er, o n March 23, 2016, PGE filed this diversity a ction in the District of Oreg o n ag ainst the Sureties,

a l leg ing breach o f the B ond and bad faith. PGE soug ht a preliminary injunction prohibiting t h e Sureties from arbitrating thei r cl a ims ag ainst PGE, claiming that A beng oa had impro p erly impleaded the Sureties. PGE also filed a J urisdictional Objection before the I CC, arg uing that “the entire arbitration is an improper and collusive effort orchestrated b y Abeng oa and its subsidiaries to drag into international arbitration claims th a t [ PGE, the Sureties, a nd the Contractor] have ag r eed to litig a te before the O reg on courts.”

I n the d istrict c o urt, the Sureties o p p o s ed the motion to enjoin a rbitration, arg u ing

, inter alia

, that “[ b] y virtue o f PGE’s selection o f the I CC Rules, it has ex pressly ag reed that the arbitrator shall decide questions of arbitrability ,” and that it is up to the I CC tribunal to d ecide w hether Abeng oa validly joined the Sureties and for w hat purposes. The Sureties then moved to stay the litig ation pending the resolution of the I CC arbitration, invoking both the mandatory stay provision of the F ederal A rbitration Act ( “F AA”), 9 U .S.C. § 3, and the court’s inherent authority to manag e its docket.

The district court r efused to stay the litig ation and g ranted the prelimin a r y i njunction, finding that “the parties never ag reed to arbitrate this dispute.” The Su r e t i e s timely appealed. This Court g rant e d a s tay of the district court proceeding s pending appeal.PGE V

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D I SCUSSI ON

PGE does not dispute the validity of the arbitration clause i n the G uaranty , but rather only its scope—PGE claims t h at the impleader provision and its acceptance of the I CC procedural r

ules do not ex tend to the resolution of its dispute with the impleaded Sureties. W e r eview de novo the district court’s c o nclusion that it, rather than a n arbitrator, should decide arbitrability

. Momot v

. Mastro
, 652 F .3d 982, 986 (9th Cir. 2011).

Generally

, “the [ F AA] e stablishes that, as a matter o f federal law, a

ny doubts concerning the scope o f arbitrable issues should b e resolved in favor of arbitration.” Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp.
, 460 U.S. 1, 24–25 (1983). Certain issues, h owe v e r , are p resumptively reserved f

or the court. Howsam v. D e a n W itter Reynolds, Inc.
, 537 U.S. 7 9, 83 (2002). These inc l u d e “ g ateway ” questions of arbitrability

, such as “ whether the parties have a valid arbitration ag reement or are b o und by a g iven arbitration clause, and w hether an ar b i t ration clause in a concededly binding c ontract applies to a g iven controversy

. ” Momot , 652 F

. 3d at 987.

However, p a r ties may deleg a te the adjudication o f
g ateway issues to the arbitrator if they “clearly a nd unmista k a b l y ” a g ree to do so. Howsam
, 537 U.S. at 83–84 (citation omitted). W e have found such deleg ation when the parties have incorporated b y referenc e t h e rules o f the American Arbitra t i o n Association ( “ A AA”), which state in relevant part that the “arbitrator shall have the power to rule

on his or her own jurisdiction, including any objections with respect to the

. . . validity of the a r b i t ration ag reement.” Brennan v. Opus Bank

, 796 F .3d 1125, 1 130 (9th Cir. 2015)PGE V

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(alteration in orig i n a l). Althoug h we have not opined on whether the incorporation of the rules of the I CC into an arbitration ag reement also constitutes clear and unmistakable evidence of a deleg ation of g ateway i s s u e s to the arbitrator,
two of our sister c ircuits have held that the answer is y es. See Shaw Grp. Inc. v. Trip l e

f i n e Int’l Corp.
, 322 F

. 3d 115, 118 (2d Cir. 2003); Apo l l o Comput., Inc. v. Berg
, 886 F .2d 469, 473–74 (1st Cir. 1989).

B e cause o f t h e similarity between the I CC Rules a nd those of the AAA, we now join those c ircuits. I n relevant part, the I CC Rules provide:

[ I ] f any party raises o n e o r more pleas concerning the ex istence, v alidity or scope o f the a r b itration ag reement or concerning whether all of the claims made in the arbitration may b e d e termined to gether in a sing le arbitration, the arbitration shall proceed and any question of jurisdiction o r of whether the claims may be determined tog ether in that arbitration shall be decided d irectly by the arbitral tribunal . . . .

I CC Rules, A rticle 6(3). T his lang uag e makes clear that the arbitrators are vested w ith the a uthority t o determine questions of arbitrability

.

PGE nonetheless contends that the I CC R ules d o not g overn the p resent dispute b ecause the B ond lacks an arbitration clause. B ecause PGE and the Sureti e s n ever

ex p ressly ag reed between themselves to deleg ate iss u es o f arbitrability to the tribunal, PGE arg u es, a court must decidePGE V

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10

whether i ts dispute with the Sureties is subject to I CC arbitration.

W e d isag ree. W hether Abeng oa properly join e d the S u reties to the arbitration pursuant to the Guaranty and t h e I CC Rules, whether the Sureties’ claim ag ainst PGE meets the Guaranty ’s test of “aris[ ing ] out of or in connection with

an ag reement w ith a Subcontractor or [ the] Guaranty
, ” 3 a nd

3 A f ew circu its h av e h eld

, o r ad o p ted v arian ts o f th e ru le, th at “ th is d eleg atio n ap plies o n ly to claim s th at are at least a rg u a b ly co v ered b y th e ag reem en t [to arb itrate].” Tu ri v. Ma in St. Ad o p t io n S ervs., LLP
, 6 3 3 F.3 d 4 9 6
, 5 0 7
, 51 1 (6 t

h Cir. 2 0 11 ); s ee Do u g la s v. Reg io n s Ba n k

, 7 5 7 F.3 d 4 6 0
, 4 6 4 (5 th C ir. 2 0 1 4 ); Qu a lco mm In c. v. No kia C o rp

. , 46 6 F.3 d 13 6 6, 1 3 7 1 (Fed

. Cir. 2 0 06 )

. B u t th is ap p ro ach is n ot u n iv ersally f o llo w ed

. S

ee Beln a p v. Ia sis Hea lth ca re , 8 4 4 F .3 d 1 2 7 2
, 1 2 9 2 (1 0 th Cir. 2 01 7 ); see a l so id

. at 1 2 90 (d eterm in in g th at “ a m aj ority o f o u r sister circu its” rej ect an y

v arian t o f th e “ arg u ab ly

co v ered ” ap p ro ach ). Mo reo v er, o n e o f o u r o w n

o p in io n s can b e read to h av e r e j e c t ed it, alth ou g h it m ig h t h av e b een in d icta b y w h ich w e w o u ld n o t b e b ou n d. S ee Ora cle Am., In c. v. Myria d Grp . A.G. , 7 24 F.3 d 1 0 6 9 , 1 0 7 6 (9 th Cir. 2 0 1 3 ).

W e n eed n o t tak e a sid e in th is circu it sp lit, o r d eterm in e if w e alread y h av e, b ecau se th e S u r e t i e s’ claim ag ain st P G E is, at least, “ arg u ab ly

co v ered ” b y th e Co n stru ct io n Co n tract’ s arb itrab ility clau se. S ee Ag ere S ys., In c. v. Sa msu ng Elecs. Co

. , 5 6 0 F.3 d 3 3 7
, 3 4 0 ( 5 th Cir. 20 0 9) (d eclin in g to tak e a sid e f o r t h e sa m e reaso n ). T h e liab ility o f b o th th e Su reties an d A

ben g o a to PGE tu rn s o n th e sam e issu e: w h eth er th e Co n tracto r d ef

au lted u n d er th e Co n s t ru ctio n Co n tract. In ad d itio n , th e Su reties an d A

ben g o a h av e sig n ed an in d em n if icatio n ag reem en t b etw een th em selv es. Cf. Mu n d i v. Un i o n S ec. Life In s. Co

. , 5 5 5 F.3 d 1 04 2 , 1 0 4 6 (9 th Cir. 2 0 09 ) (n o t in g th at n o n sig n ato ry to arb itratio n ag reem en t m ay

co m pel sig n ato ry to arb itrate if th e d i sp u t e is “ in t ertw in ed w ith th e

co n tract p ro v id in g f

o r arb itratio n ” an d th ere is a su f f icien tly clo s e

“ relatio n sh ip am o n g th e p arties” (q u o tin g So ko l Ho ld i n g s, In c. v. BMB Mu n a i

, In c. , 54 2 F.3 d 3 5 4
, 3 5 9– 6 1 (2 d Cir. 20 0 8 ))). It is at least arg u ab le th at th e Su

reties’ claim ag ain s t PGE “ arises o u t o f o r in co n n ectio n w i th

an ag reem en t

w i t h a Su b co n tracto r o r [th e] Gu aran ty ,” an d reg ard less o fPGE V

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whether PGE has ther e f o re ag reed to arbitrate its dispute
ag ainst the Sureties, are questions of the scope of the arbitration ag ree m e n t in the Guaranty
, deleg ated to the arbitrators.

The district court thus erred in e njoining the Sureties from participating in th e I CC arbitration and deny ing at least a temporary stay of the litig ation u nder the F AA, preventing the arbitral tribunal from addressing the scope of the arbitration. I f the tribunal c oncludes that the arbitration ag reement in the Guaranty ex tend s to PGE’s dispute w ith the Sureties, the litig ation should be stay ed under the F AA pe n d ing the
outcome of the ar

b i t r ation or d ismissed. On the other h and, if the tribu n a l concludes that PGE is not required under the Guaranty to a

rbitrate its d ispute with the Sureties, the district
court can then consider whether the litig a tion should proceed

or whether a discretionary stay is appropriate p ending the
outcome of the arbitration. See Moses H. Cone
, 460 U.S. at 20 n.23.

CONCL USI ON

F or the foreg oing reasons, the judg ment o f the district
court e ntering a preliminary injunction prohibiting the Sureties from pursuing claims ag ainst PGE in arbitration a nd deny ing a mandatory stay of the j u dicial proceeding s under § 3 of the F AA is V ACATED a nd the ma t t e r i s REMANDED for further proceedi n gs consistent w ith this opinion. Th e Sureties’ appeal from the order deny ing their motion for a discretionary stay is DISMISSED for lack o f

w h ich s id e o f th e circu i t s p lit th e N in th Circu i t f alls, it i s th eref

o re u p to th e ICC to d ecid e w

h eth er th e Su

reties’ claim f

alls w ith in th e sco p e o f th e arb itratio n

clau se in th e f irst in stan ce.PGE V

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12

appellate jurisdiction. See Reid v. Doe R u n Res. Corp.
, 701 F .3d 840, 844–45 (8th Cir. 2 012); Invista S.A.R.L. v

. Rhodia, S.A.
, 625 F .3d 75, 87–88 (3d Cir. 2010). Each party shall bear its own costs on appeal.